China's Unipec, the trading arm of top Asian refiner Sinopec Corp <0386.HK>, will buy 10 to 20 percent less crude from Iran under an annual contract for 2012 than in 2011, a Chinese industry executive with direct knowledge said on Tuesday.
The fall is mostly due to the steep reduction the refiner has already made in imports in the first quarter from the National Iranian Oil Company due to a dispute over credit and price terms for the contract.
Those cuts will pull down the annual average even though the Chinese refiner agreed to restore imports from its third-largest supplier back to last year's level from April after an agreement was reached last week.
Things will get back to normal from April, said the executive. Overall for 2012, Unipec's cuts would be between 10 and 20 percent.
Unipec lifted between 260,000 and 280,000 barrels per day last year under an annual contract, making it the biggest buyer of Iranian oil by company. The supplies included a first-ever term deal of some 75,000 bpd of Iranian South Pars condensate, a super light crude used as a feedstock for petrochemicals.
Even with the cuts this year, China remains a large buyer of Iranian oil. The world's second-largest oil consumer boosted 2011 purchases by 30 percent to an average of about 555,000 bpd.
Unipec won unchanged credit terms for the 2012 supplies against 2011, the Chinese executive said.
Sinopec will continue paying Iran over 60 days and 90 days, the executive said. The payment period was a key point of dispute between the two, with Iran asking for all payments to be made within 60 days, aiming to get money quicker as tightening Western sanctions make it difficult for Tehran to receive revenue from oil sales.
Unipec also won unchanged prices for some of the grades such as the South Pars condensate, the executive said. Supplies of condensate will resume from April after a complete halt in the first quarter due to the dispute.
Under the 2011 contract, Sinopec paid a discount of $5 per barrel over the average of Oman and Dubai quotes for the condensate, used to make ethylene, a building block for petrochemicals that Sinopec is rapidly expanding into.
Sinopec has so far replaced the Iranian condensate with Australia's Northwest Shelf condensate, industry sources said.
Iranian condensate will restart in April, said a second industry executive with direct knowledge of the situation.
China's state oil traders - Unipec, Zhuhai Zhenrong Corp and Chinaoil - agreed on the terms for buying Iranian crude for this year with NIOC officials, who visited Beijing last week, trade sources said on Monday.
Zhuhai Zhenrong and Chinaoil will buy the same amount of crude from NIOC, but Unipec will reduce its purchases, the sources said. Chinaoil is the trading unit of PetroChina <0857.HK>.
(Editing by Manash Goswami)